The UK’s unemployment rate, those not in work but who want a job, dropped from 4.2% over the previous three month period. Economists had expected the rate to remain at 4.2% level.

There were 1.36 million unemployed people in the UK over the three months, the ONS said, 65,000 fewer than in the previous data period.

More people were in work over the period, the ONS added, saying that there were 32.39 million people in the UK with jobs, an increase of 42,000.

“The number of people in work has continued to edge ahead, though the employment rate was unchanged on the quarter,” senior ONS statistician Matt Hughes said in a statement.

“However, the number of vacancies is a new record high, while the unemployment rate is now at its lowest since the winter of 1974-75.”

The high number of vacancies suggests that the number of Brits in employment could rise significantly in the near future.

After increasing sharply during the financial crisis, the UK’s unemployment rate has been rapidly dropping for almost a decade, as the chart below illustrates:

source

Office for National Statistics

While on the surface the data looks good, Ruth Gregory, a senior UK economist at Capital Economics, warned about the underlying cause of the drop.

“Admittedly, the ILO measure of unemployment fell by 65,000, pushing the unemployment rate down to 4.0% – its lowest since 1975 – but this reflected a jump in the number of people leaving the workforce,” she said in an email.

The UK’s unemployment rate may have beaten expectations, but forecasts proved too optimistic when it came to wages. Total earnings for British workers excluding bonuses rose by 2.7% as expected, but earnings including bonuses increased by just 2.4%, below forecasts.

“Average weekly earnings for employees in Great Britain in real terms (that is, adjusted for price inflation) increased by 0.4% excluding bonuses, and by 0.1% including bonuses, compared with a year earlier,” the ONS said.

The pound initially spiked higher against the dollar on the data release, but quickly fell back, perhaps reflecting the weaker than expected wage growth. By 9.50 a.m. BST (4.50 a.m. ET), it was trading at $1.2775, a gain of just 0.09% on the day.